25 Feb After divorce, who gets deductions for home expenses?

Q. I was divorced in 2018 and now I will be filing taxes as a single person. The house my former husband and I purchased while married will be sold next month. Because of his limited income, I agreed to pay all the marital bills until the house is sold. In 2018 I paid all the house-related expenses including mortgage, taxes and insurance. The account the bills were paid from is solely in my name. Do I have to share any related tax credits with my former husband when I file my taxes for 2019?
— Divorced

A. As a single person, you will see some important changes to your tax return.

We’re going to focus on the house and related expenses.

Real estate taxes and mortgage interest are generally deductible as itemized deductions subject to the certain restrictions, said Neil  Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.

However, he said, there will be no benefit to these deductions unless they exceed the standard deduction of $12,200 for single individuals.

There’s a “but” here.

“While you may have paid all the house expenses during 2019 from an account solely in your name, the mortgage interest and real estate tax deductions are not necessarily yours to claim,” Becourtney said.

If the house is held as tenants by the entirety, you can deduct the entire real estate taxes paid subject to the $10,000 limit on deducting state income and real estate taxes, he said. If the house is held as tenants-in-common, then you can only claim a deduction for 50% of the real estate taxes based on your co-ownership.

It’s possible, though, that the other half of the real estate taxes may qualify as deductible alimony, he said. You said you were divorced in 2018, so alimony is still deductible, he said. (That rule has changed for divorces starting in 2019.)

The rules for deducting mortgage interest are less clear.

“If the house qualifies as your principal residence or a second residence, you should be able to deduct all the mortgage interest subject to the normal indebtedness limitations — $1 million for a pre-Dec. 16, 2017, mortgage,” Becourtney said. “Presumably Form 1098 was issued by the lender under your Social Security number, so the IRS will ultimately be able to match the mortgage interest deduction reported on Schedule A filed with your 2019 Form 1040.”

You did not ask about the ramifications of the upcoming sale.

Becourtney said both you and your ex-husband are eligible to exclude up to $250,000 of gain realized on the sale of the house assuming it was used as each spouse’s principal residence for a period of at least two years out of the five-year period immediately prior to the sale.

This applies for both federal and New Jersey purposes, he said.

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This story was originally published on Feb. 25, 2020.

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